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DIESEL_SMOKE · December 21, 2007

• Navistar to Buy GM's Commercial Truck Business

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Navistar to Buy GM's Commercial Truck Business

Navistar International Corp. on Dec. 20 agreed to buy the assets and distribution rights for General Motors Corp.'s medium-duty commercial truck business.

The announcement came less than two months after Daniel Ustian, Navistar's chairman, president and chief executive officer, publicly confirmed that discussions between the two truck manufacturers were under way.

LIGHT & MEDIUM TRUCK reported last March that GM was considering selling its commercial truck business.

Under the proposed agreement, Navistar would buy GM's commercial truck business, including the Chevrolet Kodiak/GMC TopKick truck brands, and the T-Series cab-over trucks. Navistar would manufacture, design and market the trucks to GM dealers, Dave Tarrant, managing director of commercial truck strategy for Navistar, said during a telephone press conference.

The companies did not disclose exact terms of the proposal.

GM would continue to market the smaller W-Series low-cab-forward trucks built for the company by Isuzu in Japan and Janesville, Wis.

GM and International Truck and Engine Corp., Navistar's operating arm, reported selling a combined 68,743 trucks in Classes 4-7 through the first 11 months of 2007, according to data from WardsAuto.com. Their combined market share of 34% would displace Ford Motor Co. as the top seller of trucks in those classes.

[The sale would] "position GM for sustained profit and growth" and enable the company to focus on its core business, "designing and building cars and light trucks," said John Gaydash, marketing director for GM's fleet and commercial operations.

The Chevrolet and GMC commercial product lines would remain separate and competitive with Navistar's trucks, Tarrant said.

The sale would have no effect on GM dealers, Gaydash said.

"Once [the sale] is finalized, the transition should be gradual and seamless to customers," Tarrant said.

The deal is expected to close in 2008 subject to negotiation of a definitive purchase agreement, regulatory clearance and board approval, and then the transition could take several months, Navistar said.

Navistar would build the GM products, currently assembled at Flint, Mich., at a yet-to-be-determined facility, officials said.

While officials would not directly address the issue during the press conference, Navistar could benefit by having a captive fall-back customer for its V-8 diesel engine if it can not mend fences with Ford Motor Co.

International supplies the diesel engines Ford uses in all of its Super Duty Class 3-5 trucks. That amounted to about 225,000 units in 2006, according to Ford.

"The Ford deal is a joint venture for engine and manufacturing services," Tarrant said. "It differs from this deal in that we don't own the Ford business, we just supply it. In this case, we own and operate the business."

The two long-term partners sued each other earlier this year over costs and warranty issues with the engines. Their contract runs to 2012. The dispute has not been settled.

GM currently uses the Duramax V-8 diesel in its medium-duty trucks. Although Gaydash said the GM trucks would continue to use the Duramax engine "in the foreseeable future," the agreement seemed to leave the door open to put the International-built diesels into the trucks. The Duramax is built in Moraine, Ohio.

"We expect to use International engines across all of our products, but how will be determined as we go forward," Tarrant said. — Daniel P. Bearth, Jim Galligan

Keith Browning · December 22, 2007

It will be interesting to see how everything rolls out and changes. Since International already makes medium duty truck you might wonder why they would want to build trucks that are in competition with their own products at that level, and with ownership? This is weird. But imagine the look on the faces of Ford truck defectors that bought Chevy's when they see a Power Stroke under the hood. I know, probably will never happen but it would be funny.